Wednesday, August 28, 2013

Diesel prices may go up by Rs. 5/litre next week: Sources

Diesel prices are likely to go up sharply after the monsoon session of Parliament ends on September 6. Oil companies have asked the oil ministry for a one-time hike of diesel prices by at least Rs. 5-6 per litre, ministry sources told NDTV.

Oil ministry sources say that they are going to propose a Rs. 5-per-litre hike in diesel prices.  The proposal is likely to be put before the Cabinet after the Parliament session ends.

The sharp fall in the value of the rupee against the dollar and the recent strengthening global oil prices due to the Syrian and Egyptian crisis have shot up India's crude oil import bill.

The government had in January allowed oil companies to raise diesel rates by up to 50 paise per month. Any hike beyond 50 paise has to be cleared by the Cabinet. Oil companies have also asked for the cap of 50 paise per month to be raised for diesel prices due to the sharp volatility in global oil prices, sources said.

The Indian rupee slipped past 68 levels on Wednesday, down nearly 25 per cent from May, as concerns about the current account deficit and outflows from Indian assets have continued to put downward pressure on the currency. This has led to import cost of oil companies to jump from Rs. 5600/barrel in May to Rs. 7000/barrel in May.

Fuel retailers Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum Corp sell diesel, kerosene and cooking gas at subsidised rates. These oil companies are suffering a loss of over Rs. 10/litre on diesel.
Rating agency Moody's has recently warned that the falling rupee would inflate the fuel subsidy bill, and put pressure on the fiscal deficit.

Under-recoveries for oil companies on account of selling fuel below their cost were earlier estimated at Rs. 80,000 crore for FY14. But now it has ballooned to Rs. 1.4 lakh crore.

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